Father and Son Hedge Fund Managers Charged by the SEC

On July 15, 2016, the SEC charged both Thomas D. Conrad Jr. and his son Stuart P. Conrad and their two unregistered advisory firms, Financial Management Corporation and Financial Management Corporation, S.R.L. with defrauding investors in a $10 million hedge fund. The related persons and entities reside in Alpharetta, Georgia.

According to the SEC complaint, between 2010 and 2014 Thomas Conrad funneled preferential redemptions and other disbursements out of the hedge funds and to himself, family members, and certain preferred investors. All the while, Thomas Conrad had falsely informed other investors that the redemptions had been suspended. In addition, the complaint alleges that Thomas Conrad appointed himself as a sub-manager for the sole purpose of generating additional fees for himself without disclosing to the fund’s investors that he had done so. Adding to the list of violations, the SEC alleges that the defendants provided investors with literature highlighting the significant experience of Thomas Conrad, but failed to inform investors that he had been barred from the securities industry by the SEC in 1971. Lastly, the complaint alleges that Thomas Conrad titled certain assets in the fund in his name without informing investors.

The SEC alleges a long list of securities violations committed by the Thomas Conrad and Financial Management Corporation and Financial Management Corporation, S.R.L.. Thomas Conrad’s son, Stuart Conrad is alleged to have aided and abetted those violations. The SEC seeks injuctions and civil penalties for all the defendants and disgorgement and prejudgment interest against Thomas Conrad and Financial Management Corporation.

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